Science Shows That Markets Make People Fairer

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Handshaking

Are people innately fair-minded or is it learned behavior? A fascinating new study, "Markets, Religion, Community Size, and the Evolution of Fairness and Punishment," that is a big step toward resolving this question is being published today in the journal Science [subscription required]. The researchers find strong evidence that market institutions cause people to treat each other, especially, strangers more fairly. The research is based on the results of behaviorial experiments in 15 different societies which have varying amounts of integration into markets. The study, headed up by University of British Columbia anthropologist Joseph Henrich, finds:

… a crucial ingredient in the rise of more-complex societies was the development of new social norms and informal institutions that are capable of domesticating our innate psychology for life in ever-expanding populations. Larger and more-complex societies prospered and spread to the degree that their norms and institutions effectively sustained successful interaction in ever-widening socioeconomic spheres, well beyond individuals' local networks of kin and long-term relationships. It is these particular norms and their gradual internalization as proximate motivations that recalibrate our innate psychology for life in small-scale societies in a manner that permits successful larger-scale cooperation and exchange in vast communities…

[punishment, signaling, and reputational] … norms can facilitate trust, fairness, and cooperation in a diverse array of interactions, thereby allowing the most productive use of unevenly distributed skills, knowledge, and resources, as well as increasing cooperation in exchange, public goods, and warfare. More-effective norms and institutions can spread among societies by a variety of theoretically and empirically grounded mechanisms, including conquest and assimilation, preferential imitation of more-successful societies, or forwardlooking decision making by leaders or high-status coalitions.

This is exactly the sort of argument that libertarian thinker and economics Nobelist Friedrich Hayek made, especially in his last book, The Fatal Conceit: The Errors of Socialism. Successful societies are those that adopt market norms and they tend over time to outcompete societies organized in more primitive top-down ways. The upshot is that efforts to extract people from markets (e.g., communism, socialism, fascism) encourage them to revert to the innate savagery of dealing fairly only with kin and fellow tribespeople.

As the press release for the study notes:

Members of large-scale, complex human societies have learned to play nice with strangers through the norms that are associated with market participation and world religions, and not solely due to an evolved psychology for cooperation in small groups as previously believed, according to UBC-led research.

In a paper to appear in the March 19 issue of Science, lead author Joe Henrich and a 13-member research team explore the evolutionary underpinnings of human societies.

Fifteen years in the making, the study combines two major, comparative cross-cultural projects that examine how motivations for fairness and punishment influence economic decisions, and how these motivations relate to variables that differ across societies, such as community size, adherence to a world religion and market dependence and exchange.

"Our results contradict previous theories that humans learned to treat strangers fairly by transferring behaviour and norms developed in their actions and attitudes toward family and kin," says Prof. Henrich, an anthropologist who holds the Canada Research Chair in Culture, Cognition and Coevolution and teaches in the UBC Departments of Psychology and Economics.

The interdisciplinary team of anthropologists and economists conducted behavioral experiments with 2,100 respondents from 15 societies, whose communities ranged in size from 20 to 10,000 people. These small-scale societies, from Africa, North and South America, Oceania, New Guinea, and Asia, included hunter-gatherers, marine foragers, pastoralists, horticulturalists, and wage laborers.

"Our findings suggest that the evolution of societal complexity, especially as it has occurred over the last 10 millennia, involved the selective spread of those norms and institutions that best facilitated successful exchange and interaction in socioeconomic spheres well beyond local networks of durable kin and reciprocity-based relationships," says Henrich.

The study measured participants' motivations for fairness and their willingness to punish unfairness in interactions with an anonymous other. These experiments took the form of games played with real money where participants would give a portion of the cash to the second player, someone unknown to them. Some of the games allowed the second player or a third-party participant to pay some of their money to punish the first player for making low offers.

The findings show that people living in small communities lacking market integration or a world religion – absences that likely characterized all societies until about 10,000 years ago – display relatively little concern with fairness or punishing unfairness in transactions involving strangers or anonymous others, a pattern that makes sense given how local norms and institutions actually function in these societies.

Third-party observers, for example, from the smallest-scale, purely face-to-face, communities from Tanzania and Kenya to Amazonia and Oceania, show little willingness to pay to punish those making unfair offers.

"It's a pattern that makes sense given how local norms and institutions actually function in these societies," says Henrich. "Small-scale communities have local norms governing all kinds of interactions, but they often don't have default social norms of dealing with strangers or anonymous others in monetary transactions."

In contrast, the largest societies with the highest levels of market integration and participation in world religions show both a greater willingness to make fair offers and the most willingness to punish unfair offers.

I reported on earlier research in this area in my 2002 column, "Do Markets Make People More Generous?"

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  1. It is kind of sad that the concept that letting people own their own property and make their own economic decisions makes them more free is not self evident to people and has to be proven via science.

    1. proven via science

      I would argue with both the “proven” and “science” part of that, though I agree with the “the”.

      /snark

      seriously, though political science is not a science, and it is really hard to set up an actual double-blind scientific study with randomly assigned participants to prove that this process makes them more free.

      Essentially, it boils down to how you define “free” — if you define economic freedom as “letting people own their own property and make their own economic decisions”, then it is super easy to prove that economic freedom will lead to economic freedom.

      But, can you show that economic freedom invariably leads to greater social freedom?

      1. China.

        1. China =/= “invariably”

      2. I don’t think it is inevitable that greater economic freedom will result in greater social freedom, but it is more conducive.

  2. An oversimplification, certainly, but perhaps this provides a scientific basis for supporting multiparty political systems. Two parties would seem destined to (de)volve into pure power grabs…with the spoils power divided only amongst the loyal tribespeople.

    1. Two parties ARE a form of multiparty political system.

    2. Actually, there’s a lot of evidence that coalition governments (i.e. >2 party systems) tend to have larger public sectors as a consequence of logrolling and having to make deals to get into and stay in power.

  3. Very welcome.

    I find it sad that my country is moving in the opposite direction. I find it sickening that it is being led by people who profess to value the norms that they are destroying.

    1. It’s not sickening, Nancy. It’s classic bait and switch.

      1. You mean I won’t get a pony?

        1. No, Mary, you won’t.

          1. Thanks for the heartbreak, Shaneequa.

  4. Teach the controversy!

  5. In my experience, people are unfair by nature, that is selfish – not necessarily a “bad” thing, but people want what they want. Markets enable people to get what they want, those other systems do not. In any market system, people will deal fairly on the front end, while looking to leverage opportunities on the back end that aren’t as visible to maximize their profit. So, in this case “fairness” is a loaded term. It may appear more fair at the front, but actually the selfishness is transferred somewhere else.

    1. Unfair =/= selfish

      Unfair is governmental “altruism”, forcibly taking from some and giving the loot to politically favored classes.

    2. I agree that people want what they want, but in a free market,they can get it through fair and legal means as opposed to more statist markets. People will want to do what they want to do, but if they can do it legally, they tend to prefer that method to an illegal method. Punishment for use of force tends to do that.

  6. Successful societies are those that adopt market norms and they tend over time to outcompete societies organized in more primitive top-down ways. The upshot is that efforts to extract people from markets (e.g., communism, socialism, fascism) encourage them to revert to the innate savagery of dealing fairly only with kin and fellow tribespeople.

    Logically, then a society that adopted competing governmental services — that adopted a governmental marketplace instead of the current monopolistic setup — would outcompete current democratic forms of government, and lead to ending the practice of dealing “fairly only with” ideological kin.

    1. If there is no monopoly on force, it’s not really a “government”, is it? It’s a service provider.

      1. Not necessarily. For example, in Hawaii we have competing governmental education providers, in the form of regular public schools and charter public schools. Both are funded by the government, with the expected outcome that the teachers are overwhelmingly socialistic in outlook, since their paycheck comes from the government, but the charters outperform the non-charters despite less funding.

        There are various degrees of “monopoly on force” — you can, for example, have a monopoly of the underlying laws, but have competing personal protection provider services (sort of like police, except you are their direct employer and can fire them if they don’t perform to your satisfaction) operating within that monopolistic law.

        That is, as you approach an anarcho-capitalistic society, you get a more and more minarchistic society. Essentially, A/C is the ideal state of minarchism, much as a circle is the ideal state of more and more circular ellipses.

        1. You seem to be promoting an asymptotic approach to anarcho-capitalism, prole: getting closer and closer, but you will never actually reach true A/C. Which is interesting. But morally flawed, still, because any monopoly on force is unjustified.

          1. I see nothing morally flawed about gradually reducing the monopoly on force until you finally abolish it entirely.

            I have engaged in some politely heated conversations with the folks at rebirthofreason.com about whether it is possible to get to a functioning, free A/C society — they seem to be ideologically committed to the notion that that is an oxymoron.

            I have some questions about how to get rid of such stuff as a monopoly on law, but have argued the A/C case.

            1. There will always be someone with superior force. If you get rid of the government, you just get mafias. Mafias always arise in societies that don’t trust and won’t go to the authorities. That is where the La Cosa Nostra came from. Sicily is one of the most conquered and oppressed places in history. As a result, the populace rarely trusted the authorities so they made their own underground government.

              You want to know what life is like without a government, look at black markets. Drug cartels and such are not corporations. They are just police departments for people who can’t go to the cops. You end up with rule by whichever sociopath with a gun manages to win.

              1. You end up with rule by whichever sociopath with a gun manages to win.

                This is different from our current system how? The only difference is that our politicians have the cops hold the gun for them.

                1. Damn you Epi and your faster typing, damn you to hell!

                  * Shakes fist 😉

                2. I have lots of problems with cops. But if you think there is no difference between cops and the mafia, you haven’t had any dealings with the mafia beyond watching the Godfather.

              2. You end up with rule by whichever sociopath with a gun manages to win.

                And this is fundamentally different from monopolistic government backed up by people with guns how?

                Just because we get to vote for two different flavors of coercion and oppression doesn’t mean we are free.

                1. And the people who work in underground economies and run every day with the risk of being summarily executed by their rivals are so much freer than we are.

              3. “You want to know what life is like without a government, look at black markets. Drug cartels and such are not corporations. They are just police departments for people who can’t go to the cops.”

                That’s not a very good analogy at all. One huge difference between “drug cartels and such” and organizations that arise in the absence of a government is that drug cartels HAVE to operate in secrecy because of the existence of the government, and the people involved in them can’t seek other means of dispute resolution, because that would mean exposing themselves to prosecution. Neither of those factors applies in an anarchy.

          2. More to the point — is it morally flawed to say that, despite one’s best efforts to entirely get rid of monopolies on force, human nature will result there continuing to be some degree of monopoly of force despite one’s best efforts?

            That would be like saying it is morally flawed to personally be absolutely, unequivocally against rape, while remaining doubtful that we will ever get to a society where no rape will ever occur because men have that pesky Y chromosome and thus are pigs.

            1. Not quite. You’re saying that “rape will happen”, but you are in no way promoting any system which says rape is acceptable. However, if you promote any government, you are promoting a system which says a monopoly on force is acceptable.

              1. If you promote whittling away at the current government until there is nothing left to whittle away, are you “promoting a system which says a monopoly on force is acceptable”?

                Saying that the practical reality of getting to a goal of no coercion necessarily involves intermediate steps involving lesser and lesser degrees of coercion =/= saying you support coercion.

          3. Anarchist/minarchist theory unnecessarily muddies the waters, imho. The core problem always lies with the people — I don’t believe that it’s so much the case that we need to work out some strict set of rules by which we determine what is and is not justified; people just need to wake up to their own power. Were that the case, everything else works itself out.

            What we are currently trying to do is to let people believe that they are not responsible for what happens to them; that their power is rightly delegated. Of course, this power is invariably subverted and used against them.

            If people simply did not accept being subjected to rule, then the need to worry ourselves with designing and implementing any particular setup evaporates. What you end up with may look very similar to what we have now, but with one glaring difference: if and when people reject subject status, revenue becomes absolutely dependent upon voluntary choice; it is the case then that people are voting with their pocketbooks and thereby obtain the most perfect organization of government possible. I don’t even, in that case, deny the arbitrary use of force to such a government; let it try to adopt poor policy, and then to see how long it continues to be funded.

            As I am fond of saying: a corrupt government is not the disease; it is a symptom. It cannot survive where the people do not choose to be subjected to it. Whether or not it is possible that people in general will ever embrace their power, however, is an open question; until such time, it is every man for himself.

            1. Well put, josey.

              +1

    2. Logically, then a society that adopted competing governmental services — that adopted a governmental marketplace instead of the current monopolistic setup

      At some point, you need a final arbiter, that is, someone who asserts a monopoly on final resolution of disputes (and, by extension, on the standards that determine the disputes). Otherwise, your society will fragment into competing and unstable blocs, which traditionally are based on clan and kin.

      1. There is no true “final arbiter”. If, today, a judge rules that you lose your car to in a divorce to the wife you’ve been beating (and I know you have, Nancy), there is nothing to stop you from going and stealing it tomorrow. There is only punishment after the fact. So it is only the monopoly on force–in this case, the ability to put you in a cage “legally”–that matters. It is merely the hope that your fear of the cage is greater than your desire for the car.

        1. There is no true “final arbiter”.

          ahem.

      2. I posit that it is possible to arbitrate disputes via a process arrived at via a bottom-up, marketplace oriented process rather than the current centrally dictated command and control method.

        1. That is, your “final arbiter” could be a consortium of personal protection providers who agree to abide by the NIOF principle for all the subscribers to their service, and enforce that NIOF code against non-subscribers who harm the customers of the consortium.

          It would not be “final” in that people could become outlaws in the consortium’s mind and refuse to adhere to it, just as currently we have people who are outlaws and refuse to adhere to some or all of the rules laid down by “final arbiters”.

          For example, the “final arbiters” in Hawaii have said that one may not talk on a cell phone while driving, yet I continue to talk on a cell phone while driving because I think that’s none of their fucking business.

          1. I continue to talk on a cell phone while driving because I think that’s none of their fucking business

            “If I find a rule tolerable, I obey it. If I find it intolerable, I break it.”

            –Professor Bernardo de la Paz

            1. Did he say that before or after Robert Heinlein said it?

              1. The good professor is a character from The Moon is a Harsh Mistress.

              2. Heinlein never said it, he wrote it (well, I guess he might have said it too). The prof “said” it.

          2. You’re free, of course, to flout the final arbiter’s rulings. That doesn’t mean they aren’t the final arbiter.

            Your “consortium of personal protection providers” isn’t a dispute resolution service at all – it is a security service, so it isn’t a substitute for an arbiter of disputes.

            Also, it begs the question of how a resolution of a dispute will be enforced if the losing party doesn’t feel like consenting to it.

            If you have two competing arbiters serving the same population, you won’t get final resolution of disputes. Unresolved and unresolvable disputes are not a recipe for a stable society, much less a functioning market.

            1. “Unresolved and unresolvable disputes are not a recipe for a stable society, much less a functioning market.”

              You may be underestimating how hostile a place a truly free society is for people who refuse to obey its polite rules. It is not so much that a system of law provides a suitable environment for the market; it is rather the other way around. That this is not generally the conclusion of conventional wisdom is, in my opinion, evidence of how fundamentally twisted our system has become.

              “Also, it begs the question of how a resolution of a dispute will be enforced if the losing party doesn’t feel like consenting to it.”

              He is free to ignore it. He is also free to be shunned, and eventually, completely banned from society. There is no victim-funded prison system to protect and feed him; there are no blackmail and slander laws to prevent his being discriminated against. He is completely free, rather than cooperating, to choose such a life. In a free society, reputation is king.

              This is, of course, the meaning of the out in outlaw.

              It is unfortunate that so much of the debate about free societies centers on topics like these. In fact, most of your own life is lived, day to day, under the same rules under which you would live it were there no government at all. Over my life, I have not observed that most people are criminals at heart, restrained only by virtue of our government; I suspect they would not live much differently at all in the complete absence of a codified set of laws.

              Were there a 30-day media blackout, and the government collapsed on the second day, how many days would pass before you realized what had happened? If you’re employed by the government, or on the take, you’d notice right away; if not, I doubt you’d notice at all — you’d just go about your business as you always do, as would the majority of people you know.

              1. You have a point in the sense that exiling was once a much more common penalty for crime than it is today.

                Nobody is ever sentenced to exile anymore. Probably that’s becuase there aren’t any places for exiled individuals to go. Other countries won’t take them.

                1. Spontaneous economic exile, I think, is a much worse fate than physical exile, and requires no new Botany Bays.

  7. Wait-a-minute…according to this:

    In contrast, the largest societies with the highest levels of market integration and participation in world religions show both a greater willingness to make fair offers and the most willingness to punish unfair offers.

    would this make free-market-loving Catholics the fairest of them all?

  8. would this make free-market-loving Catholics the fairest of them all?

    Yes. Those four guys are cool.

    1. Is it really the case that religions make people more fair, or that the alternatives to religion that have existed tend to be state centered, and therefore productive of only evil.

      1. Note that it says “world religions” not just “religions”. I would think that the point there is that being part of a big religion makes you feel like part of a really big tribe, so you are accustomed to dealing fairly with people from different parts of the world. People who are part of smaller, local or tribal religions would presumably not show this sort of increased fairness.

  9. Also noteworthy is the theory that Female equality seems to be a pretty reliable treatment for many of the world’s worst pathologies:

    http://article.nationalreview……erg?page=1

    1. That article is about what I’d expect from that hack Goldberg. He basically says that every evil thing women do to other women is men’s fault, and everything men do that’s civil is because of women. That’s the worst kind of apologetic nonsense. And lets not forget that the growth of government in the USA directly coincided with womens suffrage.

      1. disclaimer: I’m not advocating anything, just providing food for thought. I wouldn’t roll back suffrage if I could, but this “women are all that’s good and righteous and men are evil rapists” shit has got to go.

  10. Science Shows That Markets Make People Fairer

    Looks like I picked the wrong week to stop sniffing science.

  11. Thank you!

    I try taking this kind of thing up with people like Chad who think that the Prisoner’s Dilemma proves that the government needs to force people to make the “correct” decisions.

    There’s actually abundant evidence that human beings will organize themselves in cooperative groupings to provide for common needs without a government imposing such rules upon them.

  12. I greatly benefit from your articles every time I read one. Thanks for the glasses info, it helps a lot.

    This is the best Ray Ban sunglasses article I have ever found on the Internet.

  13. Ah, the wonders of science by press conference. Where someone finds a study that hasn’t been vigorously reviewed by the scientific community and rolls with it because it confirms their already-held beliefs. You also need to be immediately skeptical of any study that claims to overturn long-held beliefs like this one does. More often than not, these studies are usually debunked within in a few years. Could this study be correct? Sure it could be, but we won’t know for several years so you people need to calm down.

    Also, there are equally as compelling studies that can give you an opposite answer. This area of science, basically cultural evolution / anthropology, is much more sketchy than the physical sciences, it will take decades before there is scientific consensus on this.

  14. Social norms versus market norms: how to screw the economy up at
    http://mgiannini.blogspot.com/…..ow-to.html

  15. A living environment constructed on the principles of voluntarism has a better chance of being peaceful than one based on participatory democracy, which contains a built-in right for the majority to impose their wishers on the minority. Direct democracy, with maximum devolution of decision-making to the level of the community (as originally practiced in Switzerland) contains the elements on which free socities could be built. In time this could lead to the scrapping of the notion of countries, and end centralised domination of vast territories and the political sport of sending young people out to kill each other.

  16. Larger and more-complex societies prospered and spread to the degree that their norms and institutions effectively sustained successful interaction in ever-widening socioeconomic spheres
    http://destinationsoftwareinc.com

  17. Gooood vere vere nice

  18. You end up with rule by whichever sociopath with a gun manages to win.

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